That`s A Switch! Sunair Leaves Amex For Otc

March 17, 1985|By Jim Talley, Business Writer

For many growing companies, eventually moving their stock issues to a larger exchange used to be like trading up from a Chevy to a Cadillac. But after more than two decades on the American Stock Exchange, a Fort Lauderdale-based firm recently decided to return to its old trading grounds on the over-the-counter market.

``If you were going to auction off your car tomorrow, would you rather have one bidder or 10?`` asks Robert Uricho, president and chief executive officer of Sunair Electronics Inc., a manufacturer of high frequency communications equipment. ``When you`re on the Amex, there`s one (floor) broker handling the stock. But on the OTC it`s a more active, flowing marketplace to do business in.``

Sunair stockholders voted overwhelmingly in January to move its 4.8 million shares outstanding, and last week the company was listed on the National Association of Securities Dealers` computer screens at brokerage offices nationwide.

The company posted $14.4 million in sales last year, the bulk from supplying radio equipment to government agencies such as the Coast Guard and Federal Highway Administration and to 101 foreign countries. Cash-rich and debt-free, Sunair had net income of $2.5 million last year -- off from the $3.37 million at year-end 1983.

Some big, well-known companies, including Apple Computer Inc. and MCI Communications Inc., have opted to stay on the OTC even though they qualify for the American or New York exchanges.

But Sunair is the first firm in a decade to move its stock off the Amex to the OTC, Amex spokesman Bob Shabazian said.

``We obviously think it`s more advantageous moving this way,`` Shabazian added, ticking off a number of reasons: that Amex-listed companies acquire, on average, 29 percent more individual shareholders after being on the exchange the first year; that institutional holders of the company`s stock increase; and that, on average, three times more brokerage research is done on Amex- listed firms than on those on the OTC.

Neither Sunair`s Uricho, nor Chuck Berger, Apple Computer`s treasurer, dispute those points. But both think they have little to do with being on the American Exchange.

``It`s because those companies are worth following and worth buying stock in,`` Berger said. ``There`s been no impact on the visibility we get by staying on the OTC.``

The number of exchange-listed companies has declined in the past 10 years as the OTC`s tally has increased sharply. In 1975, there were 1,557 companies on the New York Stock Exchange compared to 1,543 at the end of last year. The American Exchange`s roster has dwindled from 1,215 companies to 792 over the same period.

Meanwhile, the number of OTC-listed companies has swelled from 2,467 to 4,097.

Most of the Amex`s losses are due to mergers and acquisitions, companies moving up to the New York exchange and to delistings when companies no longer meet exchange standards, Shabazian said.

Still, it is clear Sunair and other companies prefer the OTC`s market-maker system to that of the exchanges.

On the exchanges, a member called a floor specialist is assigned certain companies and processes the buy and sell orders for those issues. If there is an imbalance of orders, that specialist and others may step in with their own money and maintain an orderly market by buying or selling for their own aa number of market-makers. These are brokerage firms that have placed purchased shares of a company`s stock in their inventory and then set bid and asked prices. ``When they`re making a market, it gives them more of an interest in a stock,`` Sunair`s Uricho said.

Moreover, stock liquidity -- the ease and speed with which a stock can be traded without undue price swings -- is apparently greater on the OTC, according to an independent study conducted by two Texas A & M business professors. Published in Georgetown University`s ``Journal of Financial Research`` late last year, it concludes there is ``a marked decline in liquidity for securities moving from the OTC market to either of the organized exchanges. Stocks that switch from the Amex to the NYSE experience initial liquidity increases, followed by a gradual decline.``

``It`s just a better mousetrap,`` adds Jerry Williams, who heads up Tampa- based Williams Securities Group Inc., a Sunair market-maker. ``Sunair did not get the Amex specialist`s full attention.``